Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://southasiainvestor.blogspot.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Monday, March 5, 2018

Is Pakistan's Global Diplomacy Working?

Diplomacy underlies all ties between nations. Diplomatic relations form the basis of travel, trade and investment between countries. The probability of armed conflict increases in the absence of diplomacy. In light of the recent failure to keep Pakistan off the terror financing watch list, the following question is being asked by political commentators and pundits: Is Pakistan's diplomacy working? To begin to answer this question, let's first look at where Pakistan ranks on Lowy Diplomacy Index. The 2017 Lowy Institute's Global Diplomacy Index visualizes the diplomatic networks of 60 G20, OECD and Asian nations, allowing users to view and compare some of the most significant diplomatic networks in the world.

Pakistan's arch-rival India has 181 missions, including 124 embassies and 48 consulates. India ranks 12th in the world and 3rd in Asia on Lowy Diplomacy Index. United States is number 1 and China is number 2 on diplomacy index.
US has 273 diplomatic missions while China has 268. France ranks 3rd, Russia 4th and Japan 5th in the world.

Foreign Policy Objectives:

Pakistan does have a large network of diplomats and extensive presence of diplomatic missions around the world. But what is it for? The answer to this question requires understanding Pakistan's foreign policy objectives.

Pakistan, like any other nation, needs to ensure its national security in all its dimensions: political, economic and military. The nation has to participate in various international fora. It needs to project its soft power to cultivate friendly cultural and educational ties. Part of it is encouraging people-to-people contacts by promoting travel, trade and tourism.

Pakistani Diplomats Responsibilities:

Pakistan foreign service officers posted around the world have the responsibility to not only project Pakistan and its policies in a positive way but also to be the nation's eyes and ears giving information and feedback to policymakers back home.

Pakistani diplomats need to engage with their host nation's influencers as well as other nations' diplomats in foreign capitals and international institutions to promote friendship and goodwill for advancing Pakistan's foreign policy agenda.

Pakistani Diaspora:

Pakistani missions have the responsibility to provide services to 9-million strong Pakistani diaspora, the world's sixth largest. This diaspora not only sends home nearly $20 billion a year but can also help in promoting Pakistan's friendly ties with the host nations. Pakistani diaspora represents a huge market opportunity for Pakistani exporters. Highly accomplished overseas Pakistanis can be a source of investment and expertise for their country of origin.

International Geopolitics:

All policies must take into account the shifting geopolitics of the world. Former US Secretary of State Henry Kissinger put it best when he said: “America has no permanent friends or enemies, only interests.”

Rapidly unfolding events confirm shifting post-cold-war alliances in South Asia. The Cold War ended in early 1990s when Pakistan was closely allied with the United States. Now China-Pakistan defense collaboration is strengthening. Chinese President Xi Jinping has committed investment of over $45 billion in Pakistan, representing the single largest Chinese investment in a foreign country to date.

Pakistan's Key Relationships:

Pakistan's key relationships are with China, US, India, Russia, Afghanistan, Iran and the European Union. These relationships require the greatest attention by Pakistani foreign and security policy establishment to advance the country's foreign policy agenda.

These relationships need the most care and feeding to achieve the objectives of peace, development, security and prosperity. The best and the brightest of Pakistani diplomats need to be assigned to manage these crucial ties.

Current Assessment:

It's not fair to judge the entire foreign policy establishment based on the negative outcome of just one meeting at FATF. However, Pakistan needs to learn from it and fashion its policy in a rapidly evolving geopolitical reordering. Long term, Pakistan needs to continue to cultivate close ties with its traditional friends in China and the Middle East. Pakistan must take seriously what Henry Kissinger said about US friendships: “America has no permanent friends or enemies, only interests.” It must also assume that other leaders in the rest of the world say privately what Kissinger said publicly.

Summary:

Diplomacy underlies all ties between nations. Diplomatic relations form the basis of travel, trade and investment between countries. Pakistan ranks 27th in the world and 7th in Asia on Lowy Diplomacy Index. The 2017 Lowy Institute's Global Diplomacy Index visualizes the diplomatic networks of 60 G20, OECD and Asian nations, allowing users to view and compare some of the most significant diplomatic networks in the world.

In light of the recent failure to keep Pakistan off the terror financing list, the following question is being asked by political commentators and pundits: Is Pakistan's diplomacy working? It's not fair to judge the entire foreign policy establishment based on the negative outcome of just one meeting at FATF. However, Pakistan needs to learn from it and fashion its policy in a rapidly evolving geopolitical reordering. Long term, Pakistan needs to continue to cultivate close ties with its traditional friends in China and the Middle East. Pakistan must take seriously what Henry Kissinger said about US friendships: “America has no permanent friends or enemies, only interests.” It must also assume that other leaders in the rest of the world say privately what Kissinger said publicly.

ISLAMABAD (Reuters) - As U.S. influence in Islamabad wanes, Pakistan’s former adversary Russia is building military, diplomatic and economic ties that could upend historic alliances in the region and open up a fast-growing gas market for Moscow’s energy companies.

Russia’s embrace of Pakistan comes at a time when relations between the United States and its historical ally are unraveling over the war in Afghanistan, a remarkable turnaround from the 1980s, when Pakistan helped funnel weapons and U.S. spies across the border to aid Afghan fighters battling Soviet troops.

Though the Moscow-Islamabad rapprochement is in its infancy, and it is neighbor China that is filling the growing void left by the United States in Pakistan, a slew of energy deals and growing military cooperation promise to spark life into the Russia-Pakistan relationship that was dead for many decades.

“It is an opening,” Khurram Dastgir Khan, Pakistan’s defense minister, told Reuters.“Both countries have to work through the past to open the door to the future.”

The cozier diplomatic ties have so far focused on Afghanistan, where Russia has cultivated ties to the Afghan Taliban militants who are fighting U.S. troops and have historic links to Islamabad. Moscow says it is encouraging peace negotiations.

Both Russia and Pakistan are also alarmed by the presence of Islamic State (IS) inside Afghanistan, with Moscow concerned the group’s fighters could spread towards central Asia and closer to home. In Pakistan, IS has already carried out major attacks.

“We have common ground on most issues at diplomatic levels,” Pakistan’s Prime Minister Shahid Khaqan Abbasi told Reuters.“It’s a relationship that will grow substantially in the future.”

During a trip to Moscow last month by Pakistan’s foreign minister, Khawaja Asif, the two countries announced plans to establish a commission on military cooperation to combat the threat of IS in the region.

They also agreed to continue annual military training exercises that began in 2016 and followed the sale of four Russian attack helicopters to Pakistan, as well as the purchase of Russian engines for the Pakistan Air Force’s JF-17 fighter jets that Pakistan’s military assembles on its own soil.

The detente has been watched with suspicion by Pakistan’s neighbor and arch-foe India, which broadly stood in the Soviet camp during the Cold War era. In the last two decades, the close Russia-India relationship has been underpinned by huge arms sales by Moscow to a country it calls a“strategic partner”.

“If the Russians start backing the Pakistanis in a big way at the political level, then it creates a problem for us,” said Sushant Sareen, a leading expert on India’s relations to Pakistan and Afghanistan with New Delhi-based Observer Research Foundation.

In other words, can China become a part of the solution, rather than being perceived as a part of the India-Pakistan problem? A three-way India-China-Pakistan cooperation is not only necessary but indeed possible, and Chinese President Xi Jinping’s Belt and Road Initiative (BRI) provides a practical framework for such partnership. Unfortunately, Mr. Modi has allowed himself to be misled by his advisers on the BRI. The government’s opposition to the BRI is based, among other things, on the myopic argument that the China-Pakistan Economic Corridor (CPEC), a flagship project under the BRI, violates India’s sovereignty since it passes through Pakistan-occupied Kashmir (PoK).

Not only does this argument hold no water but it also undermines India’s long-term development and security interests. First, CPEC does not recognise PoK to be Pakistan’s sovereign territory. Article VI in the 1963 China-Pakistan boundary agreement clearly states in that “after the settlement of the Kashmir dispute between Pakistan and India, the sovereign authority concerned will reopen negotiations with the Government of the People’s Republic of China....” Second, there is little possibility of India ever getting PoK (Azad Kashmir), or Pakistan ever getting the Indian side of Kashmir, through war or by any other means. Therefore, connectivity, cooperation and economic integration are the only realistic bases for any future India-Pakistan settlement of the Kashmir dispute.

Third, and most important, both China and Pakistan have stated that they are open to India joining CPEC. China has also expressed its readiness to rename CPEC suitably to both address India’s concerns and to reflect the project’s expanded regional scope. Already, Iran, Afghanistan and several Central Asian republics have agreed to join this ambitious regional connectivity project. Will it help or hurt India if it joins this renamed initiative as an equal partner? Will it not connect Lahore and Amritsar (also Delhi and the rest of India), the two sides of Kashmir (which all Kashmir-based political parties want), Sindh and southern Punjab with Gujarat and Rajasthan, and Karachi with Mumbai?

BRUSSELS – The European Parliament warned Pakistan last week that the renewal of its favored status trade deal would be dependent upon the government’s release of a woman, Asia Bibi, who has been held on death row on a blasphemy case since 2010.

Prior to adjournment, however, the parliament voted to continue to extend economic favor to Pakistan despite the fact that the woman’s appeal is still pending in the Supreme Court of Pakistan. The extracted delay has been decried as a human rights issue that must be addressed not only by the EU but by other organizations around the world.

From a global standpoint, the European Union has held the greatest leverage to prompt action by Pakistan leadership. The EU granted Pakistan Generalized System of Preferences Plus (GSP+) in 2013. Under this special trading status, 20% of the country’s exports to the EU have been tariff-free. Another 70% of their exports were tariffed at preferential rates.

In 2016, Pakistan exports to the EU were valued at € 6.173 billion (≈ $1.7 billion USD). That represented a 53.6% increase in export trade since gaining the GPS+ status. The loss of that status would deal the country a severe economic blow, in effect, making it incapable of competing successfully with other South Asian nations.

In light of a previous statement by Pakistani leadership that “gaining access to European markets was the top-most priority of the government,” the EU parliament pressed for action in the Asia Bibi case.

The case was reviewed by three Ministers of the European Parliament, including one from Pakistan. While the Christian Union Party lobbied against extending GPS+ status based “on questions regarding minority rights in Pakistan,” the recommendation to the parliament was to extend the special status base on the country’s ability to demonstrate “full and sincere compliance with 27 human rights conventions.”

Pakistan continues to enjoy the European Union’s GPS+ status. The human rights issue of Asia Bibi is ongoing but remains unresolved.

Pakistan received remittances amounting to $1.639 billion in February 2018, up 2.32% compared with $1.417 billion in the same month of the previous year, according to data released by the State Bank of Pakistan (SBP).

Overall, overseas Pakistani workers remitted $12.834 billion in the first eight months (July to February) of fiscal year 2018, up 3.4% compared with $12.411 billion received during the same period of the preceding year.

Remittances play a major role in stabilising Pakistan’s external sector as it largely covers the deficit in the trade of goods account. Nevertheless, in recent times, they have come under pressure due to a global economic slowdown on the back of low crude oil prices.

Country-wise breakdown

In February 2018, Pakistan received $201 million in remittances from the UK, which is 17.5% higher than $171 million that the country received in the same month of the previous year.

Remittances increase 8.72%, amount to $1.724b in Dec

In the first eight months (Jul-Feb) of fiscal year 2017-18, remittances coming from the UK jumped by 23% to $1.786 billion from $1.449 billion in the same period of last year.

The value of the UK pound has gained over 6% against the rupee in the last few months. This is one of the highest jumps shown by any major foreign currency against the rupee in the open market.

Analysts believe, apart from other factors, the increase in the value of any particular foreign currency encourages overseas Pakistanis to send back more money.

Similarly, an increase was also noted in remittances coming from the US as the country received $207 million in February 2018, up 16% compared with $178 million in the same month last year.

Overall, remittances from the US in the first eight months of current fiscal year increased by 12% to $1.712 billion from $1.525 billion.

Pakistan received $332 million in February 2018 from the UAE, up 3.75% compared with $320 million from the same month of the last year.

Remittances from the GCC countries (other than UAE and Saudi Arabia) declined by 11% to $149 million in February 2018, compared with $168 million in the same month in 2017.

Whereas, remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries (combined) during February 2018 increased to $163 million, up 13% compared with $144 million received in February 2017.

Pew Research Center report: The flow of remittances in and out of Pakistan

Overseas Pakistanis living in the European Union (EU) sent back $49 million in February 2018, up 53% compared with $32 million in the same month of last year.

Saudi Arabia left behind

Remittances from Saudi Arabia – the most important source of remittances for Pakistan – have shown declining trends in recent months.

Remittances from Gulf countries, which have historically accounted for the largest share annually, dropped drastically due to a sharp fall in crude oil prices that hurt the region’s economies.

Pakistan received remittances of $348 million from Saudi Arabia in February 2018, down 14% compared with $404 million in the same month of 2017.

As flows of trade and people fell the world over since the 2008 global financial crash, India dropped 16 spots to 78 (Pakistan 99) from 62 among 140 countries in 11 years , from 2005 to 2015, on a globalisation index brought out by international logistics company DHL.

The Global Connectedness Index 2016, the fourth since it was first released in 2011, prepared by Pankaj Ghemawat and Steven A Altman (both teach management at New York University Stern School of Business, United States) was released on 15 November, 2016.

The authors slotted India in the central and south Asia group along with Georgia, Turkey, Nepal, Pakistan, Armenia, Uzbekistan, Kazakhstan, Bangladesh, Azerbaijan, Kyrgyz Republic and Sri Lanka.

The index measures the parameters on depth and breadth. Depth evaluates the extent to which countries' international flows are distributed globally or more narrowly focused, while breadth compares countries' international flows to the sizes of their domestic economies.

Trade flows are measured by exports as a share of a country's gross domestic product, capital by foreign direct investment as a share of a country's gross fixed capital and international stock market investment, information by international connectivity and people by share of international tourists and university students and migrants as a share of the population.

Pakistan and its textile sector have been facing challenging times in recent years, owed in part to costs of production increasing at a pace faster than its neighboring competitors, but a new infusion of funds could help get the country back on better footing.

The All Pakistan Textile Mills Association (APTMA) announced that its members have a plan to increase investment in Pakistan’s textile industry by establishing 1,000 garment manufacturing plants with a total of $7 billion in investments, according to Pakistan’s The Express Tribune.

The plan is to set up garment plants near major textile producing cities like Lahore, Sheikhupura, Faisalabad, Kasur, Multan, Sialkot, Rawalpindi, Karachi and Peshawar, with the plants installing half a million stitching machines, which will boost annual production to 3 billion pieces.

Pakistan’s textile industry has experienced decreasing investments over the last decade, as potential investors have been hesitant to make new investment due to high business costs. This has caused the sector to miss out on technological advantages to its competitors.

New investments dropped to more than half a billion rupees ($4.52 million) in 2016-17, compared to 1 billion rupees ($9 million) in 2005-06, the Tribune said citing APTMA. Further, currently about 35 percent of the textile industry’s production capacity was damaged, causing loss of approximately $4.14 billion worth of potential exports.

Once the proposal is implemented, the industry will need an additional 10.3 million bales of raw cotton, 345 million kilograms of manmade fiber, 1.98 billion kilograms of additional yarn and an additional 7.93 billion square meters of processed fiber. However, cotton-producing area and cotton production have decreased 30 percent and 38 percent, respectively, in Punjab since 2011.

Although the textile sector performed poorly overall, readymade garments did show reasonable growth. According to the Pakistan Bureau of Statistics, exports of readymade garments registered 5.55% year-on-year growth against the overall flat growth of the textile sector, which stood at $12.45 billion in 2016-17.

APTMA members has reportedly provided the government with a long list of corrective and conducive policy measure demands in return for their investments, including implementation of long-term policies, like consistent nationwide energy prices, removal of 3.50 rupees (3 cents) per kilowatt hour surcharge on electricity tariff, an extension of the duty drawback scheme for five years and drawbacks to be increased every year by 1 percent for garments (up to 12 percent) and made-ups (up to 10 percent) against realization of export proceeds.

The proposal also suggested the government allow LTFF (long-term financing facility) to indirect exports, Islamic financing and building of infrastructure for garment plants.

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About Me

I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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